Mortgager’s Right Ends Once the Sale Notice is Issued Under SARFAESI as Liquidator Cannot Dispute the E-Auctioned Property Sale | NCLAT

Case Details: Pratibha Industries Ltd. v. Yes Bank Ltd. - [2025] 173 taxmann.com 763 (NCLAT-New Delhi)

Judiciary and Counsel Details

• Rakesh Kumar Jain, Judicial Member & Naresh Salecha, Technical Member
• J. Rajesh, Dhrupad Vaghani, Md. Arsalan Ahmed, Yashwardhan Agarwal & Jaitegan Khurana, Advs. for the Appellant.
• Anupam Singh, Ajeyo Sharma, Nika Tiwari, Rajshree Chaudhary, Diksha Dadu, Honey Satpal, Kanishk Khullar, Advs. & Sunil Fernandes, Sr. Adv. for the Respondent.

Facts of the Case

In the instant case, the corporate Debtor (CD) had availed a credit facility from the secured creditor through a term loan and had created an exclusive mortgage on the two properties. CD was admitted to the CIRP, and a moratorium under section 14 of the IBC was imposed.

The creditor issued the first e-auction sale notice under section 13(8) of the SARFAESI Act, 2002, but the e-auction was declared unsuccessful because no bid was received. The Second e-auction sale notice was issued, and the first property was sold, for which one buyer gave the highest bid.

The creditor accepted the Bid, and a confirmation letter was issued in favour of the buyer. The remaining payment of the sale consideration was made, and the sale certificate was issued. The Sale was confirmed, and it was registered. Regarding the second property, since the creditor received no bid, it issued a letter of confirmation to itself for the said property and issued a sale certificate.

The appellant, liquidator of CD, filed an application for reversing the sale transactions of properties on the ground that the sale had been affected after the imposition of a moratorium, which the NCLT dismissed. Thereafter, an appeal was made before the NCLAT.

It was noted that once the borrower fails to tender the entire amount of dues with all costs and charges to the secured creditor before the publication of the auction notice, his right to redemption of mortgage shall stand extinguished/waived on the date of publication of the auction notice in the newspaper in accordance with Rule 8 of the Security Interest (Enforcement) Rules, 2002.

NCLAT Held

The NCLAT held that the relationship between the mortgager and the mortgagee, for the purpose of redemption, exists till the date of issuance of the notice of sale. If the property is being sold under section 13(8) of the SARFAESI Act, then in that situation also, the appellant has no right to the property to raise the dispute. Thus, there was no merit in the appeal filed by the appellant, and the same was to be dismissed.

List of Cases Reviewed

• Order of NCLT (Mumbai) in M.A No. 1662 of 2019, dated 08.04.2024 (para 39) affirmed.
• Celir LLP v. Bafna Motors (Mumbai) (P.) Ltd. & Ors. (2024) 2 SCC 1 (para 37 ) followed.
• Indian Overseas Bank v. M/s RCM Infrastructure Ltd. & Ors. Civil Appeal No. 4750 of 2021 (para 34) distinguished.

List of Cases Referred to

• Putta RM. Ramanatha Iyer v. T.S Ramachaei and Anr. 1958 SCC OnLine Mad 144 (para 18)
• CELIR LLP v. Bafna Motors (Mumbai) Pvt. Ltd. & Ors. (2024) 2 SCC 1 (para 19).